It’s dealt all but a fatal blow to the Volkswagen brand. VW’s so-called diesel dupe saw the world’s best-selling vehicle manufacturer post a quarterly loss for the first time in 15 years, its long-term chief executive resign, the recall of millions of its cars, global sales taking a dive, a $15-billion settlement fine in the United States and, most recently, billions worth of legal claims from investors and the possibility that car owners could sue.
But in South Africa, VW’s performance has continued as if the raging scandal never existed. It looks forward to its sixth year of dominance in the passenger car market and increased its market share in the first six months of this year.
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It’s a remarkable feat for the company, considering the gravity and extent of the global news. Word broke nine months ago, when the Environmental Protection Agency (EPA) in the US found that certain VW diesel models were being sold with a “defeat device”.
The device was a sophisticated piece of software that picked up factors such as speed, air pressure and steering wheel angle to detect when a car was being tested. As soon as “test” conditions were detected, emissions were temporarily decreased. The result? Cars were being touted as “clean” while pumping up to 40 times the allowed amount of nitrogen oxide into the air. At the time, VW had undertaken a big diesel sales push in the US, backed by a flashy marketing campaign punting its low emissions rates.
Volkswagen internal memos and emails suggest that then group chief executive Martin Winterkorn knew about the cheating devices as early as 2014. According to these documents, one of the top executive’s confidants sent him an email in May raising the alarm. But VW admitted fault publicly more than a year later. The company now says that up to 11-million cars worldwide could be affected, including the Audi A3, VW Jetta, Beetle, Golf and Passat, and some Porsche models in the US.
VW has also found irregularities in tests to measure carbon dioxide emissions levels that could affect about 800 000 cars in Europe, including petrol vehicles — although following investigations, they made a much more conservative estimate of 36 000 cars produced annually.
A backlash has ensued. At the end of last month, VW announced in Washington that two related settlements had been struck, one with the US government and the state of California, and the other with the US Federal Trade Commission. The total settlement will cost VW $14.7-billion. It includes offering 500 000 car owners a buyback option, spending up to $10.03-billion to compensate consumers and outlaying $4.7-billion to mitigate pollution from the cars and invest in green vehicle technology. The US government requires that 85% of the affected diesel cars be recalled.
In December, sales in the US were down by 25% from the year before. Shareholders have been channelling their rage into multiple class-action law suits — one report said there are at least 34 separate actions taking place. Some US car owners have already received $1 000 gift vouchers from VW along with a written apology.
Other world, other priorities
In South Africa, VW owners are unaffected and, seemingly, unperturbed. The VW Polo Vivo topped the chart as SA’s best-selling car in June and the VW Polo came in second.
“The emissions scandal makes no difference to me,” said one woman. “I’m feeling pretty loyal to the brand at the moment — after two and a half years, my Polo Vivo has only lost 11% in book value, which is insane.”
According to VW sales consultants, her sentiment is widespread. “From my experience, it’s not a popular question in South Africa,” said a VW salesperson, when asked if diesel customers inquired about the emissions levels of cars. “The thing that people mainly seem to be concerned with in this country is fuel economy.”
Matt Gennrich, spokesperson for VW South Africa, has said none of the cars involved in the overseas recall will be brought into South Africa. “We are reworking all the cars in Europe, and in the US any cars bought back will be destroyed,” he said.
US writer Sebastian Blanco, who blogs for AutoblogGreen, says it is still not known whether the recalled vehicles can be “fixed.
“VW still hasn’t told the regulators how or if it can make these noncompliant diesel vehicles meet emissions standards,” wrote Blanco. “The EPA says: ‘Volkswagen may also propose an emissions modification plan to EPA and [the California Air Resources Board] and, if approved, may also offer owners and lessees the option of having their vehicles modified to substantially reduce emissions in lieu of a buyback.’ In other words, whatever magic VW engineers are working on to keep affected diesel vehicles on the road has not yet been proven.”
When the news first broke, VW South Africa published a statement indicating that the US and European concerns were not of local relevance. “We meet the CO2 emissions as published in our official specification sheets for all our vehicles. There is therefore no action required on either the part of our customers or the dealers.”
The tax threshold in South Africa, which taxes cars that emit at least 120g of CO2 per kilometre, are based on the standards effected in Europe in 2012. Some say they are therefore more lenient than those overseas, which have been revised several times since.
But National Association of Automobile Manufacturers of South Africa (Naamsa) director Nico Vermeulen said: “While the threshold has remained unchanged, the tax rate has increased progressively and several times since then. Vehicle fuel efficiency in South Africa in respect of new vehicles has improved significantly by more than 1% per annum.”
Winstone Jordaan, the founder of local electric vehicle company GridCars, said South African emissions regulations lag behind other countries.
“South Africa does not have emissions legislation imposing restrictions to the level that other countries do, including countries like China and India,” he said.
“One of the implications of South Africa lagging on emissions legislation is that it has become the dumping ground for the world. When Japanese cars are no longer allowed to be driven because of emissions, they are exported to South Africa. Two-stroke engines in tuk-tuks and other smaller motorcycles no longer allowed in other countries find their way to South Africa. This will result in South Africa always remaining behind the technology curve and being subservient to all other nations.”
Vermeulen disagreed, pointing out the increased fuel efficiency of new cars on South African roads as an indicator.
But Naamsa says “the application of CO2 taxes to new motor vehicles only is not fair or appropriate. Instead, all vehicles operating on South Africa’s roads should be subject to emissions taxation as all vehicles contribute to emissions. This can only be achieved through a levy on fuel. It is unfair to single out buyers of new motor vehicles while the real culprits, in terms of emissions, are the older vehicles operating on our roads.”
Jordaan has said the money raised should be channelled directly into addressing the emissions issue.
“The collected taxes go to the fiscus and as such do not get used to mitigate the problem,” he said. “It would be far better if this was put into fossil fuel efficiency research, or to promote and support electric vehicle development in South Africa.”